A program the state approved three years ago makes it easier and cheaper for consumers and businesses to pay for energy-efficiency retrofits. Why is it taking so long to get off the ground?

Working with Erin Deady, a municipal law attorney, as its legal adviser, EcoCity Partners focused on helping cities apply for grants to pay for setting up the program. “We were all so excited,” Wallander says. “We thought the sky was the limit.”

Several months after Florida’s PACE bill became law, however, the PACE approach suffered a big blow. The two federal home financing agencies — Fannie Mae and Freddie Mac — stunned PACE supporters by announcing they would no longer purchase mortgage loans for homes that carried PACE debt.

Driving the decision by Fannie and Freddie was a key part of the PACE legal structure: In the event of foreclosure, PACE assessments are paid first, ahead of the mortgage loan. The mortgage giants were still picking up the pieces from the housing market collapse and were sensitive to anything that might harm mortgage lenders.

Since Fannie Mae and Freddie Mac back most mortgage loans sold in the U.S., their decision put PACE “on life support,” says Wallander. Across the country, cities and counties put their programs on hold. Even Berkeley, which started PACE, shelved its residential program.

Another factor that slowed PACE in Florida was part of the original 2010 law, which was written to allow cities and counties to form partnerships to administer PACE programs. In 2012, the Legislature changed the law so that third-party administrators could handle the financing and administer the loans.

Today, three years after the Florida law passed, PACE is still more promise than success story. Demand from consumers has been all but non-existent: Only two PACE deals have closed.

The program continues to draw more interest from companies that want to run programs than from consumers wanting to borrow money. Because there is no limit to the number of cities or counties that can sign on with each PACE district, the administrator firms want to sign up as many local governments as they can. “In Florida, these companies are jockeying for a PACE market share,” Wallander says. “There has been intense competition between PACE providers.”

So far, three PACE districts have formed in Florida, involving a total of 20 cities and counties [“PACE Setters"]. Wallander’s EcoCity Partners, which has enrolled 11 municipalities in a PACE district called Florida Green Energy Works, is focusing on commercial properties. Commercial loans aren’t entangled with Fannie Mae or Freddie Mac, though some commercial mortgages require consent before doing basic improvements, Deady explains.

Other programs target both residential and commercial properties. A partnership between Kissimmee and Flagler County created the Florida PACE Funding Agency in June 2011, and a year later that program hired McLean, Va.-based SAIC Energy, Environment and Infrastructure to run it. SAIC opened a district office in Orlando. “We are paying a significant amount upfront to develop the program,” says Jonathan Schaefer, the SAIC program manager. “It’s not an easy thing to do.”

Meanwhile, Cutler Bay, an early pioneer in exploring PACE, and six other cities have formed the special taxing district of the Clean Energy Green Corridor. These cities hired Santa Rosa, Calif.-based Ygrene Energy Fund as their program administrator and opened for business in July, with a formal ribbon-cutting ceremony in September.

The PACE administrators say they feel comfortable moving ahead because Florida’s PACE law requires notification of the mortgage lender, but not consent. There’s still the issue, however, involving the sale of homes that carry PACE loan debt — what if a buyer, or the buyer’s mortgage lender, says no to assuming the PACE debt? In that event, the seller and buyer can work out an agreement to pay off the assessment, says Joseph Spector, vice president of operations for Ygrene Energy Fund Florida. Prepayment is allowed.

“We make sure we give full disclosure to all property owners before getting into this financing,” he says. “The first document we give you explains the Fannie Mae and Freddie Mac situation.”

Administrator firms also have faced other problems — some say it has been tough to secure financing. It’s also been difficult to overcome some homeowners’ resistance to having a tax assessment attached to their property.

To market the programs, the districts are relying on contractors to spread the word, plus direct mail and advertisements. “I have found the contractors get it pretty quickly,” Schaefer says. “They don’t really care about the details.”